Mexico-based suspensions and brakes auto supplier, Rassini, continues to post financial metrics in line with our expectations due to record-high sales in the U.S.

Mexico-based suspensions and brakes auto supplier, Rassini, continues to
post financial metrics in line with our expectations due to record-high
sales in the U.S., as well as to the company's financial discipline to
improve margins and reduce leverage.

The North American automotive industry's perfomance shows some signs of
leveling off, particularly in the passenger car segment. However, we
consider that growth prospects in the light-truck segment will support
the company's top-line performance and key credit metrics.

The stable outlook reflects our view that the company will continue to
adhere to its prudent financial policies, and that this will result in a
debt to EBITDA of around 1.0x and free operating cash flow (FOCF) to debt
of above 25% in the next 12 months. It also incorporates our view that
the North American Free Trade Agreement (NAFTA) renegotiation wouldn't
result in significant setbacks for the company's operations, at least in
the short term.

In line with our expectations, Rassini's suspensions and brakes segments
continue to deliver solid performance thanks to increased demand for its
products and to market share gains, particularly in the U.S. brakes market. As
a result, the company's credit metrics improved over the last year, with a
debt to EBITDA ratio of 1.0x and FOCF to debt of 44% for the 12 months ended
June 30, 2017.
We expect Rassini to continue posting solid revenue growth stemming from
renewed and recently awarded platforms. This will enable the company to expand
its market share in the brakes and coil springs segments, while maintaining
its position as the top provider of leaf springs in North America. We expect
the company to maintain its EBITDA margin close to 19% for the next two years,
after a consistent increase in the past few years due to favorable trends in
the U.S. automotive market and to increasing value added to its products. In
addition, recently awarded contracts in its brakes platform reflect the
company's ability to adapt to higher technological client demands.
In our view, the ratings on Rassini capture potential changes to the terms of
trade under NAFTA, although we expect that current renegotiations won't have a
major effect on the company's operations, in the short term. We consider that
the level of supply chain integration in the North American auto industry, as
well as Rassini's standing as a Tier 1 auto supplier protect the company's
competitive position to some extent.
A source of risk to Rassini's business profile stems from some signs that the
U.S. auto industry's performance is leveling off. In our previous forecast, we
had estimated light-vehicle sales of about 17.5 million for 2017. We're
revising this forecast downward by 5% due to a slowdown of passenger car
sales. Mitigating this risk are positive medium-term growth prospects of
light-truck sales, which is the segment that represents the largest share of
Rassini's EBITDA.
Ford Motor Co., General Motors Co., and Fiat Chrysler Automobiles N.V.
represent about 75% of Rassini's total sales, and the company generates all of
its EBITDA in North America. The lack of geographic and customer
diversification is a rating constraint for Rassini.